Observers temper expectations for Sears liquidation deals

Eager to avoid bankruptcy, the one-time retail giant is counting on hordes of shoppers to scoop up discounted merchandise, fixtures and equipment as soon as possible.

But despite the everything-must-go sales at dozens of outlets, Sears still has to survive as a company once restructuring is complete, says marketing Prof. David Soberman from the University of Toronto's Rotman School of Management.

"They have an obligation to their shareholders," says Soberman. "They're not trying to squeeze every last penny (but) just like any company they're trying to make themselves as profitable as they can."

Typically, liquidation sales follow a tried-and-true process: start with a modest discount and whatever products are left will gradually get dropped in price until they're gone.

Sears has until Oct. 12 to vacate premises slated for closure, most of them in small-town Alberta, Ontario, Quebec and Saskatchewan.

A shorter liquidation schedule could mean steeper discounts sooner. Soberman says it's a balancing act for Sears, which has turned to external liquidators to handle downsizing — some of whom were involved in similar sales for Target and Eaton's.

"Longer time means the discounts don't have to be as deep, but then you have to pay the staff longer and it's more difficult to rent the store, so all of these things are trade-offs."

Sears has been operating under court protection from creditors since June 22, when it announced plans to shutter 59 stores and cut approximately 2,900 jobs.

The liquidation process involves 54 of those stores, starting on or shortly after Friday.

Whether significant crowds show up is a question.

Some observers expressed disgust that thousands of longtime employees are not getting severance payments while executives are slated to receive $9.2 million in retention bonuses.

"So @SearsCA is laying off hundreds of employees and not paying severance? I wont spend another dime in Sears," wrote Twitter user @WTFisHalonCon, while @TecnicoPaixao tweeted: "Close your doors @SearsCA! I will not spend another dime there, this is disgusting!"

"People will do whatever is in their own best interest," says Atkinson, senior partner at the Toronto-based J.C. Williams Group.

Still, Atkinson questioned whether the deals will be that great anyway. She advises shoppers to be prepared to accept whatever brand is being liquidated, and cautions against hoping to score that fridge or range you might have had your eye on.

"The reality is that you may get what would be the equivalent of a scratch-and-dent kind of situation," says Atkinson. "They are floor models. In the stores they don't carry inventory of major appliances."

The manufacturer will likely still offer a standard warranty, but she doubted Sears would sell extended coverage.

"And even if they did, I'm not sure I would want to be buying an extended warranty from a company that is in bankruptcy protection," says Atkinson.

Appliances, though, are traditionally one of Sears' stronger sellers so it's unclear if they will even be included in the deals. A Sears spokesman declined to comment.

Soberman expected discounts will vary widely between locations.

"The things that are selling well in other locations will be moved. Things that aren't selling well are where you're going to get the strongest discounts. It's also going to be highly local specific — what's on special in Truro (N.S.) may be quite different from what's on special in a Sears location that's closing in Ontario."

Atkinson expects clothing deals might be a disappointment.

"Obviously, if they're closing these stores, people really haven't jumped at it already," Atkinson notes wryly.

"I would expect that you will only see spring and summer merchandise — you won't see any fall merchandise, unless it's last year's, which could mean that it's pretty beat up."

And overall, she expects far fewer opportunities to find deep discounts in the small towns.

"It's not like they can bring in inventory to clear from other stores, that's not how it works, or from their warehouse. It would only be when they go into full liquidation that they would do that kind of thing."

Sears no doubt hopes the crowds will show up, but Soberman wondered whether photos of eager shoppers picking over discounted goods would help or hinder efforts to rebrand "a pretty stuffy older image."

"It's like vultures circling over prey," he says.

"When people are only going there because the prices are so low, you're also conditioning people (to think), 'The only reason I go to Sears is because I'm paying 50 per cent.'"